This paper investigates the relevance of government purchasing behavior for innovatiobased economic growth. We construct a parsimonious Schumpeterian growth model in whdemand from the public sphere can effectively alter the economy’s rate of technologichange. We incorporate results of various empirical studies arguing that public sector demaacts as incentive for private innovation activities. In contrast to the standard Schumpetergrowth framework, we account for industry heterogeneity in terms of innovation potentiThis extension allows to bring government demand policy within the realm of the growth picy debate. By varying the composition of its purchases, the government can induce a realcation of private resources to stimulate the rate of technological change. This comes alowith temporarily faster economic growth. Moreover, our welfare analysis implies that italways worth implementing a policy in which industries benefit from public purchases subjto their specific innovation size.